A New Jersey energy company and a scientist said Tuesday they have launched a joint venture to license energy-storage technology using compressed air.

The joint venture, Energy Storage and Power LLC, intends to license compressed-air energy-storage technology patented by Michael Nakhamkin, who led the design and deployment of the technology at the only CAES plant in the United States, located in McIntosh, Ala.

PSEG Global is investing $20 million over the next three years to run the startup, said Paul Rosengren, a spokesman for PSEG Global, which is a subsidiary of PSEG Energy Holdings and an affiliate of PSEG Inc. (NYSE: PEG). PSEG Inc. also owns New Jersey electric and gas utility PSE&G.

The CAES technology allows power-plant operators and utilities to store electricity generated in times of lower demand, such as at night, and to make it available at times of high demand, during the day.

Here's how it works: Electricity from wind farms, for example, is used to run an air compressor that pumps compressed air into a sealed cavern. During peak-demand hours, the compressed air is piped and heated to run electricity-generating turbines. CAES facilities can be built in former mines that previously harvested salt or oil and gas.

The concept of compressed-air energy storage is more than 30 years old. At the Alabama plant, built in 1991, compressed air is used to reduce the use of natural gas, as a mix of both is used to drive turbines during off-peak hours. Germany has a similar CAES plant, which it built in 1978.

Conserving natural gas isn't the only selling point for Energy Storage and Power's technology. Instead, the company wants to profit from a growing interest from utilities and power plant operators to better manage electricity production and demand.

The tremendous growth of wind energy has renewed interest in CAES technology. Wind farms typically generate more electricity at night, when there already is a surplus of electricity. The ability to bottle the energy for day use, when electricity is most valuable, is an attractive proposition.

The patent for the CAES technology at the Alabama plant expired two years ago. Since then, Nakhamkin has worked on improving the technology and patenting his new ideas. Compared with the previous CAES technology used to build the Alabama plant, a similar-sized plant designed with the improved process would emit one-thirtieth of the nitrogen oxide, Rosengren said.

The cost of building a CAES plant will depend on the project's size and location. Rosengren declined to provide an estimate for this. The plant in Alabama cost $5 million to $7 million, he said.

Energy Storage and Power's primary focus will be licensing Nakhamkin's design, although it could build its own plants as well. The design could build CAES plants with a capacity of 15 megawatts to 450 megawatts.

Although the CAES technology sounds attractive, it hasn't been widely adopted. A proposal to build a CAES plant
in Norton, Ohio, fell through. Norton Energy Storage, owned by Haddington Ventures in Houston, Texas filed for an application to build a CAES plant in 2000. Sandia National Laboratories was to help Norton develop the plant, according to a press release from the lab.

Sandia is working on developing a 268-megawatt CAES plant in Iowa (see Green Light post). The project is scheduled for completion in 2012.

Compressed-air storage is but one of many technologies being developed to store power. Other options include batteries, flywheels and superconducting magnetic storage (see DOE's list of case studies).